March 07, 2018 at 10:56 AM
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You’ve advised your client to introduce a high-deductible health plan with an accompanying health savings account for its upcoming medical insurance renewal. Congratulations are in order! Your client has just joined the nearly 25% of employers taking this major step towards consumer driven health care.
But your role in implementing the HSA program has just begun. To ensure that your client’s employees maximize the value of their HSAs, the following best practices are essential.
Practice Total Transparency
The shift to HDHPs from a typical PPO or HMO plan is significant and comes with several caveats that could easily be construed as “negatives” to an uninformed employee.
Make sure that the following points are explained clearly so that HSA participants aren’t caught off guard post-open enrollment: No First-Dollar Coverage.
OK, not all HSA compatible health plans lack first-dollar coverage. But the vast majority do.
Employees should be emphatically aware that they will pay out-of-pocket for all medical services — including primary care and specialist visits, with the possible exception of some preventive care services required by the Affordable Care Act — until they’ve met their individual or family deductible.
Tax Filing Changes
Annual income taxes for HSA participants are filed differently. Employees are required to complete Form 8889 (part of Form 1099SA), which documents any HSA withdrawals and contributions made throughout the year.
More Skin in the Game
HSAs are designed for a more autonomous consumer. Employees need to know up-front that enrolling in and contributing to an HSA is more involved than signing up for a simple payroll deduction. The HSA holders are taking control of their own health care decisions.
Communicate With Your Audience
Any successful enrollment or new product rollout relies heavily on communication, and getting employees into HSAs is no different.
Today’s workforce is more diverse demographically than ever. The needs of a 25-year-old recent college grad vary exponentially from those of a 45-year-old parent of two or a 64-year-old soon-to-be Medicare eligible employee. Therefore, HSA education must be tailored on an individual basis using cost-calculators and specific examples.
How does your audience prefer to receive information? Phone, email, mail, in-person? Typewriter? Telegraph?? As a benefits consultant in today’s world, you must be able to communicate with employees and distribute necessary information using any and every channel that your client desires.
Equip Management, Empower Employees
Open enrollment is a small window. And in today’s competitive marketplace, employers have increasingly less time to devote to benefits. In some cases, you might be able to hold in-person meetings to educate staff on HSAs and field questions. But, more often than not, your interaction at the employee level will be extremely limited, if not non-existent. Especially if your client base consists of mid to large market employers.
Management – The First Line of Defense
The shift towards employee health care self-reliance in the workplace starts with management.
When it comes to HSAs, make sure that the HR director, benefits manager, CFO or whoever is the primary administrator knows the in’s and out’s of the product and how to explain it. Because employees will go to them first with questions.
Provide Adequate Resources
Sending out a detailed HSA overview at open enrollment is a good start. But, for employees to completely understand and adopt the program, they need to have a stable of resources readily available to them. Load your benefit admin system with relevant information. Direct them to instructive videos. Mail them IRS changes at the beginning of the year. Make sure there’s no stone left unturned.
Now for the Easy Part
Advocating for a product with a spotty track-record is unethical. Luckily, HSAs provide battle-tested value for consumers when administered properly. Now that you’ve practiced transparency in revealing potential “downsides” to HSAs, it’s time to share the good stuff.
Employer sponsored HSAs allow for contributions to be made on a pre-tax basis. Meaning that employee contributions through payroll accumulate over time completely tax free. Also, unlike other tax-advantaged savings accounts, HSA participants are never taxed on money withdrawn to pay for qualified medical expenses.
Any unused HSA dollars can be rolled over, tax-free to the next year. While flexible spending arrangements (FSAs) and health reimbursement arrangements (HRAs) only allow a portion (if any) of the contributions to rollover, health savings accounts continue to grow, unabated, even if an employee leaves the company.
Lower Health Plan Rates
High deductibles + no first-dollar coverage = lower per-paycheck costs. Increasing take home pay is a priority for every employee. Be sure to communicate that switching from the low-deductible PPO option will almost always lower costs on the front-end.